Manipulate The Market

Using tax incentives or other sweeteners, many a town has manipulated corporations into locating within the city limits.

Sometimes it's a question of attracting an anchor store for a mall development. Tax money is invested in the ability of a firm, say, a Borders book store, to attract additional traffic that benefits all.

The locality then reaps the rewards of increased sales tax that more than makes up for what is lost on the sweet deal and everyone's happy.

Sometimes the municipality backs a losing horse.

The city of Pico Rivera in California bet that Borders would be a winner and they invested federal grant money and their own assets.

The taxpayers of Pico Rivera may be paying a price they can't well afford. That's the problem with gambling. You never want to bet more than you can afford to lose.

To get Borders to open up shop in their town, the electorati of Pico Rivera put together a deal that subsidized the bookstore's rent. As far as Borders' executives could determine, the store in Pico Rivera wasn't going to aid in the ailing vendor's resurrection and the place is slated for closure by April.

Note to public officials: If you build it, the customers won't necessarily come. Borders fell behind the technology curve and its survival depends on turning around an unwieldly train that's waiting at the e-book station while Barnes & Noble and Amazon race ahead.

With seven years left on the lease agreement, Pico Rivera is trying to find a way to get out from paying over $30,000 per month in rent. It is hoped that the city is only on the hook for $10,000 per month in subsidies that were promised to the property owner and Borders.

Either way, it's a lot of cash and the taxpayers can't be pleased at developments.

Clearly, they didn't make extensive use of Borders or the store wouldn't be rated as underperforming. Add to that the cost of subsidizing the rent for the next seven years, do the math, and the next election won't be pretty.

The city council plans to re-negotiate the lease, and if property owner Vestar doesn't cooperate, they'll be seeing a great deal of the local building inspector.

Considering the current economic climate, it's unlikely that the Borders space will be rented anytime soon.

Which means the people of Pico Rivera will be covering the cost of a bad bet for some time to come.